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U.S. Personal Income Rose 0.6%
In February; Spending Jumps 0.4%

By

John Simons Staff Reporter of The Wall Street Journal

Updated March 30, 1998 10:57 a.m. ET

WASHINGTON -- Americans received an income boost in February and did what most people would: They spent it.

Last month, personal income increased 0.6%, or $23.1 billion, while at the same time personal consumption expenditures rose 0.4%, or $43.7 billion, the Commerce Department said. And a separate report indicated that while consumer-confidence levels slipped a bit, they're still pretty strong.

The Commerce Department's report on personal income is available

The easy-come, easy-go cycle reflected in Friday's report isn't all bad. Consumer spending represents two-thirds of the gross domestic product and has been key in sustaining the seven-year-old economic expansion. Strong income growth and solid consumer spending are "the twin pillars of the current boom," noted Joel Naroff, an economist with First Union Corp. in Philadelphia. "I can't see any reason why that part of the economy is going to slow anytime soon." He added, "It would take Asia drastically slowing employment growth to really slow down this economic momentum."

The White House put a spin on the numbers, using the opportunity to take a five-year measure of the economy under President Clinton. Administration economist Gene Sperling said that since February 1993, Mr. Clinton's first full month in office, nearly 15 million jobs have been created.

Job growth has served to tighten labor markets, forcing employers to lift wages in order to compete for workers. Real wages and salaries -- which account for roughly 60% of overall personal income -- rose 0.9% in February, after posting a 0.8% increase in January. Further, personal disposable income, or income minus taxes and other payments, rose 0.6% in February, after rising 0.8% in January. The Commerce Department said the increase was at least partly due to federal tax cuts enacted in 1997.

Even with all their spending, Americans are managing to put a little more money away. Personal savings as a portion of disposable personal income was 4.3% in February, up from 4.2% the month before. Inflation-adjusted disposable income is up 4.3% from a year earlier.

Separately, the University of Michigan's consumer sentiment index inched downward in March to 106.5 from 110.4 in February, said sources who have seen the subscriber-only report. Consumers' feelings about current economic conditions also took a hit, falling to 113.7 from 120 in February, and expectations about future economic conditions fell to 101.9 in March from 104.2 in February.